The Dax was previously trading in a tight range, lagging behind its US counterparts. However, as the European market turns bullish, the Dax has enjoyed an upswing. The index has been dubbed as a proxy for European sentiment.
While supportive economic data has elevated the index, geopolitical uncertainties have previously held the Dax back from bullish tones. Here, we explore the advantages and disadvantages of the index.
The Dax 30 has reached its target mark of €12000. The bullish rally of European equities lifted the index to its target range.
German data impressed traders this week; German inflation is estimated to reach 3% this year. German IFO Business Climate lifted to 111. German 2016 Q4 GDP was up 0.4%. PPI bumped up 0.7% in January, crushing estimates of 0.3%. Additionally, Manufacturing PMI reports from Germany and the euro region pointed towards further expansion, surpassing forecasts.
Some of the main geopolitical risks that have held back the Dax rally;
- The 2017 elections
- A busy election season poses a serious risk to the Eurozone. Populist movements are sweeping the bloc, and many front runners are anti-euro.
- The Dutch elections are up first in March. Geert Wilders, leader of the Party for Freedom, looks likely to win the vote of the Dutch. Wilders wants to leave the Eurozone.
- Up next is the French elections in June. Another far-right candidate is likely to win here. National Front Leader Marine Le Pen has expressed the desire to leave the European Union.
- German elections are due to commence in September.
- The timing of Italian elections has yet to be decided, but could happen as early as this summer.
2. Greece’s Debt Crisis
Dragged back into the news in February, Greece’s debt is to be deliberated by both the IMF and EU. It is likely that there will be some changes to Greece’s debt plan.
3. Brexit
Brexit negotiations are due to commence by the end of March, according to British Prime Minister Theresa May. The UK’s departure could cause several issues for Europe. Ranging from trade to immigration.
4. Russia’s intervention in Ukraine
Since the US has retreated from the transatlantic partnership, Europe has been left increasingly exposed to Russia’s involvement in Ukraine.